TMI Blog2024 (1) TMI 829X X X X Extracts X X X X X X X X Extracts X X X X ..... the consolidated fund of India / State. The third part is the period in respect of which such amounts ought to be due viz., two years preceding the liquidation commencement date. The middle / second part of the said sub-clause connects the first and the third part by employing the expression in respect of . The expression in respect of has been held by the Hon'ble Supreme Court as an expression of wide import / connotation. It is equivalent to in connection with or in relation to . The amounts due to the Central Government must be in connection with, the whole or any part of the period of two years preceding the liquidation commencement date - in the instant case, the demands are in respect of the period 2012 and 2015-2016 on the basis of the Order in Original in 12 of 2012 and 80 of 2015-16 dated 27.03.2012 and 08.01.2016. It is thus beyond the two years preceding the commencement of liquidation date and the Company having been liquidated and the respondent having failed to lodge any claim under IBC at any stage of the proceeding under IBC and the sale proceeds having been distributed in terms of the waterfall it may not be permissible to sustain the impugned dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii. In response to the Public Notice, many of the creditors submitted claims in terms of Regulation 16 of LPR. viii. Service Tax Department (1st Respondent) did not submit any claims. ix. Thereafter, the assets of the CD/WPEPL were brought for sale vide public auction dated 9.11.2009. The petitioner was the highest bidder, and the auction was knocked down in his favour on 22.01.2020. x. Deed of Sale dated 15.10.2020 was issued to the petitioner as per Regulation 32A of LPR. xi. The entire process was placed before the NCLT for approval and the same was approved by Order dated 08.02.2021 made in IA/852/2020 in CP/250/IB/2018. xii. Thereafter, the auction proceeds of Rs.63,00,00,000/- were distributed amongst the creditors of the CD whose claims were admitted by the Liquidator as per Section 53 of IBC. xiii. On 21.12.2020, Final Statement was filed by the 2nd Respondent with the NCLT in Form H as per Regulation 45 of LPR. 3.1. Whileso, the 1st respondent issued the impugned demand notice on the petitioner calling upon the petitioner to pay service tax dues of Rs. 3,09,46,169/-, on the premise that WPEPL suffered Order in Original No.12 of 2012 and 80 of 2012 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory dues is not applicable to the liquidation process and the results thereof contemplated under Section 33 of the IBC Code. (ii) Section 87(c) proviso of the Finance Act, 1994 lays down that the arrears of the predecessor company is recoverable from the transferee and successor company which includes enforcement measures like attachment and sale. 5. Case of the Petitioner: a) Liquidation operates as a civil death of the company and thereby it ceases to exist and the estate of the company vests on the liquidator who administrates the same for the benefit of the creditors. b) Upon liquidation only the liquidation estate vests with the official liquidator which is brought to sale in public auction. c) Liquidation operates as a clean slate and snaps the link between the antecedent creditors and successful auction purchaser. d) Service tax claims are not entitled to any preferential treatment under the IBC and must go through the grind contained in IBC and Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016, (hereinafter referred to as LPR ). e) Any Statutory claim which is not lodged in accordance with the method and the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in as is where is conditions was a consequent event to the liquidation process under Section 33 of the IBC Code. Thus the provisions of Section 31 of the IBC Code, which provide that if the resolution plan is approved even the statutory dues owed to the Central Government or State Government should be wiped off, is not applicable in this case as the same does not fall within the realm of Section 30 and 31 of the IBC Code. The bar against recovery of statutory dues is not applicable to the liquidation process and the results thereof contemplated under Section 33 of the IBC Code. 8.1. The above clause is sought to be relied upon by the revenue to suggest that the petitioner had agreed to pay the tax dues and thus cannot contend to the contrary. The above submission is misplaced for two reasons: i) A close reading of the said clause would show that in terms of the Tender Condition, purchase is not made subject to the payment of taxes that are already due instead it only refers to taxes hereafter to become chargeable or payable in respect of the assets conveyed. A plain reading of Clause 7 does not enable recovery of taxes that are already due. ii) Section 53 of IBC while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in whole or in part or effects any change in the ownership thereof for the dues of the predecessor. Section 87 of the Finance Act cannot be read in isolation but must be read along with Section 88 of the Finance Act and Section 238 of IBC which reads as under: Section 88 of Finance Act: 88. Liability under Act to be first charge. Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of tax, penalty, interest, or any other sum payable by an assessee or any other person under this Chapter, shall, save as otherwise provided in section 529A of the Companies Act, 1956 (1 of 1956) and the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 (51 of 1993) and the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of 32 2002) and the Insolvency and Bankruptcy Code, 2016, be the first charge on the property of the assessee or the person as the case may be. Section 238 of IBC: 238. Provisions of this Code to override other laws.- The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry first charge under Section 88 of the Finance Act, would yield to Section 53 of the Finance Act. Thus, reliance on Section 88 of the Finance Act and the first charge that is created therein to sustain the impugned demand notice overlooks that Section 88 of the Finance Act itself by employing the expressions save as otherwise provided .... in Insolvency and Bankruptcy Code brings the curtains down on the attempt by the revenue to sustain the impugned demand notice. 10. Reliance was placed on the judgment of the Hon'ble Supreme Court in the case of State Tax Officer vs. Rainbow Paper Limited reported in (2023) 9 SCC 545 by the learned counsel for the Respondents to submit that if a fiscal statute contains a statutory provision which provides for a first charge, the same would override the provisions of IBC. The above submission overlooks the material difference between the Finance Act,1994 and Section 48 of the Gujarat Value Added Tax it may be useful rather necessary to contrast the provisions: Section 48 of Gujarat Value Added Tax Act Section 88 of the Finance Act, 1994 48. Tax to be first charge on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings departure may be made. In this regard, it may be relevant to refer to the decision of the Hon'ble Supreme Court in RPS Infrastructure Ltd., vs Mukul Kumar reported in 2023 SCC Online 1147 wherein it was held as under: 20. The second question is whether the delay in the filing of claim by the appellant ought to have been condoned by respondent no. 1. The IBC is a time bound process. There are, of course, certain circumstances in which the time can be increased. The question is whether the present case would fall within those parameters. The delay on the part of the appellant is of 287 days. The appellant is a commercial entity. That they were litigating against the Corporate Debtor is an undoubted fact. We believe that the appellant ought to have been vigilant enough in the aforesaid circumstances to find out whether the Corporate Debtor was undergoing CIRP. The appellant has been deficient on this aspect. The result, of course, is that the appellant to an extent has been left high and dry. 21. Section 15 of the IBC and Regulation 6 of the IBBI Regulations mandate a public announcement of the CIRP through newspapers. This would constitute deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central / State Government in terms of Section 53(1)(e)(i) of IBC, the distribution from the sale proceeds of the liquidated asset is only in respect of the amount due for two years preceding the liquidation commencement date. A reading of Section 53(1)(e)(i) of the IBC would reveal that it is in three parts, the first part identifies the nature of the due i.e., amount due to the Central / State Government including that which is received on account of the consolidated fund of India / State. The third part is the period in respect of which such amounts ought to be due viz., two years preceding the liquidation commencement date. The middle / second part of the said sub-clause connects the first and the third part by employing the expression in respect of . The expression in respect of has been held by the Hon'ble Supreme Court as an expression of wide import / connotation. It is equivalent to in connection with or in relation to . In this regard, it may be relevant to refer to the following judgments: i) T olaram Relumal v. State of Bombay, 1954 SCC OnLine SC 22 : 9. The High Court took the view that without stretching the language of Section 18(1) b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery wide. It seems to us that in the context of Section 23(1-B) in respect of has been used in the sense of being connected with , and we have no difficulty in holding that the currency in respect of which there has been contravention covers the sale proceeds of foreign currency, sale of which is prohibited under Section 4(1). The intention of the legislature is clear from the Explanation to sub-section (1-B) of Section 23 which provides that for the purposes of the sub-section property in respect of which contravention has taken place shall include deposits in a bank, where such property is converted into such deposits . If for this sub-section any property in respect of which a contravention has taken place includes deposits into which the property may be converted and can be reached even where the deposits are in a bank, it is not reasonable to think that the sale proceeds in Indian currency of any foreign exchange would be outside the scope of Section 23(1-B) and therefore not liable to be confiscated. In our opinion the High Court was wrong in quashing the order of confiscation which we consider valid and lawful. 14. On applying the above judgments to Section 53 of IB ..... X X X X Extracts X X X X X X X X Extracts X X X X
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